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OPI Pacific Finance aiming for moratorium agreement


Tuesday 29th April 2008

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Troubled MFS Pacific Finance, now called OPI Pacific Finance, is working to a three-week timetable on its moratorium proposal to give it access to a $A20 million payment.

In late January Pacific Finance defaulted on interest payments to some investors. More than 12,000 New Zealand investors are waiting to find out what will happen to their $325m of investments.

Pacific Finance intends to seek investor approval of a moratorium arrangement, with the aim of making an orderly realisation of its loans and investments.

Australian company MFS, now called Octaviar, owns 38.5% of Pacific Finance's parent MFS New Zealand, now OPI New Zealand.

In its interim financial report for the half year to the end of December, released to the Australian stock exchange yesterday, Octaviar said it had made an $A246 million ($NZ297.5 million) provision for Pacific Finance in relation to put option obligations.

Pacific Finance was one of a group of unsecured creditors that Octaviar said it would need to reach an accommodation with, in order for Octaviar to continue as a going concern.

Under the put option, Octaviar is obliged to buy Pacific Finance's assets at the then carrying cost in certain circumstances.

The put option provision of $A246m was the estimate of the loss Octaviar would suffer if all the assets of Pacific Finance were put to Octaviar.

A critical component of a moratorium for Pacific Finance would be an agreement with Octaviar around the provision of future funding as an alternative to Octaviar fulfilling its obligations under the put option, Octaviar said.

Octaviar had placed $A20m in trust in relation to the put option on March 13. Should Pacific Finance enter a moratorium within 67 days of that date then the funds in trust would be released to Pacific Finance as an initial payment under the put option, or a standstill arrangement.

Today, Pacific Finance said it had provided the trustee and its advisors with the draft moratorium proposal, and was working with them to finalise documentation to be sent to stockholders as quickly as possible.

For the $A20m in trust from Octaviar to be released, Pacific Finance needed to have a moratorium agreement by May 19, otherwise the money must be returned to Octaviar unless it agreed to extend that date.

The moratorium documentation was expected to be released this week and the meeting held on May 19, Pacific Finance said.

Trading in the shares of OPI New Zealand and of Octaviar has been suspended.

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